Feel like your personal finances are too complicated? It's time to streamline and declutter. Laura gives tips to simplify your financial life, stay organized, and know which financial records to keep and for how long.
2. Know Which Paper Documents to Keep.
First, let’s cover which paper documents you should keep. Never throw away these originals, even if you have a digital copy:
- Wills, trusts, powers of attorney, and medical directives
- Promissory notes
- Loan documents
- Titles or deeds
- Documents with raised seals and notarized signatures
- Home closing documents
- Receipts for home improvements
- Receipts for expensive items
- Birth, adoption, and death certificates
- Marriage and divorce certificates
- Military records
- Sentimental documents like handwritten notes
- Any financial document you can’t access online
Some financial institutions may only offer free access to online documents for a limited period. If you need them later, they may not be available or you might have to pay for access, which is why it’s easier to download and save them as you go.
Consider keeping vital original documents in a secure place, such as a bank safe deposit box.
Consider keeping vital original documents in a secure place, such as a bank safe deposit box. You can get a small storage box for less than about $100 a year at a local bank or credit union. If you have an attorney, they can also keep records for you.
Another option is a home safe or a filing cabinet that locks, if they’re fire and flood resistant. Put all key documents in an airtight plastic bag, just in case. Plus, keep digital backup copies of these documents in the cloud, just in case the originals get destroyed. I’ll cover more about digital filing in a moment.
3. Streamline Your Taxes.
You might be wondering what to do with your old tax returns. The IRS allows you to keep digital copies of returns and supporting documents for the income, deductions, and credits you claim.
Generally, you need to keep old tax files as an individual for a minimum of three years. However, if you have complicated transactions, such as the purchase or sale of investments or real estate, I recommend holding taxes for seven years so you could answer any questions that could arise in an IRS audit.
4. Create a Digital Filing System.
A key part of going paperless is making it easy to scan documents that you don’t need to keep in physical files, so you can shred the paper and file the digital copies.
Try a free scanning app, such as Genius Scan, on a mobile device. It’s loaded with image enhancement features and allows you to export documents as JPEG or multi-page PDF files to email, text, or cloud services such as Google Drive, Dropbox, and Evernote.
If you have stacks of paper to scan, a traditional flatbed scanner with a document feeder will save time. Many inexpensive printers have built-in scanners that send files to your computer or email. There are portable scanners that even integrate with a variety of services and accounting software, such as QuickBooks and TurboTax.
Create a digital filing system, such as folders and sub-folders on your computer desktop, plus at least two backup locations.
Create a digital filing system, such as folders and sub-folders on your computer desktop, plus at least two backup locations. You might save digital files on an external drive and use a free cloud service. Those backups will be a lifesaver if your computer dies or disappears.